racial discrimination

Dodd-Frank Financial “Reform” Violates Property Rights and Equal-Protection Guarantees

by Hans Bader on January 9, 2011 · 2 comments

in Bailout Watch, Economy, Legal, Property Rights, Regulation

Last week, I described how the Dodd-Frank financial “reform” law passed last summer violates constitutional separation-of-powers safeguards by giving unaccountable bureaucrats the power to seize companies and legislate through administrative fiat.  But that is not the only way Dodd-Frank violates the Constitution.  It also violates property rights and equal-protection guarantees.

For example, it contains racial preferences that were criticized by members of the U.S. Commission on Civil Rights. It “imposes race and gender employment quotas on the financial industry,” noted economist Diana Furchtgott-Roth in the Washington Examiner. Its ”Section 342 states that race and gender employment ratios must be observed by all government agencies that regulate the financial sector, as well as private financial institutions that do business with the government.”

This unconstitutional requirement is the brainchild of Los Angeles Congresswoman Maxine Waters, the Castro-loving, left-wing ideologue who earlier praised the Los Angeles race riots that destroyed scores of Korean-owned businesses as an “uprising” against injustice. Waters once told a CEO in a public Congressional hearing, “This liberal will be all about socializing . . . .uh, uh . . . would be about, basically, taking over and the government running all of your companies.”

Law Professor Richard Epstein notes that Dodd-Frank is also an unconstitutional “taking” of private property, since it deliberately forces certain banks to process debit card transactions at a loss. (That provision is being challenged in a lawsuit called TCF Bank v. Bernanke. Debit cards did not contribute to the financial crisis in any way, but Dodd-Frank regulates them at the behest of large businesses that objected to being charged any fee by banks for processing debit card payments. Thanks to Dodd-Frank, some customers will now be charged annual fees for their debit cards.)

Dodd-Frank itself contains little “reform,” reinforcing the very features of the status quo that spawned the financial crisis.  Congressional Democrats blocked a GOP amendment that would have reformed the government-sponsored mortgage giants, Fannie Mae and Freddie Mac, and the Obama administration lifted a $400 billion limit on bailing them out and showered their executives with $42 million in pay — even though Treasury Secretary Geithner has admitted that “Fannie and Freddie were a core part of what went wrong” in the financial crisis.

Fannie and Freddie helped spawn the mortgage crisis by buying up risky mortgages and repackaging them as prime mortgages, thus creating an artificial market for junk: “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”

At the direction of the Obama administration, Freddie Mac ran up more than $30 billion in losses to bail out mortgage borrowers, some of whom had high incomes. Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.

Dodd-Frank is not unique in containing racial preferences. Many bills backed by Obama are riddled with racial set-asides, including the health care law passed last year. Obamacare has attracted criticism from the U.S. Commission on Civil Rights for containing both racial preferences and lower standards for treatment in predominantly-minority institutions, potentially harming both white applicants and minority patients. This racial discrimination appears to violate court rulings like the Supreme Court’s Adarand decision, and the Rothe and Western States Paving decisions issued by the federal appeals courts.

The Hidden Costs of Health Care Reform: “Obamacare Is A Budgetary Disaster”

by Hans Bader on March 8, 2010 · 2 comments

in Health and Illness, Healthcare, Insurance, International, Legal, Nanny State, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation, Sanctimony

The health care bills backed by President Obama will cost $2.3 trillion, not the $900 billion Obama claims, and will be a “budgetary disaster” that drives up the national debt, explains health care expert James C. Capretta.  The Obama administration managed to hide $1.4 trillion in costs generated by the health care reform bill though a series of budgetary “gimmicks” that the Congressional Budget Office (CBO) is required to treat as valid in scoring the bill’s enormous cost.

Although the CBO is low-balling the costs of ObamaCare, even it concedes that as a whole, “President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade.”

ObamaCare spends money on frills like “cultural competency,” while cutting spending on crucial things like anesthesia.

Most Americans oppose the health care legislation backed by the president. It would reduce lifesaving medical innovation, raise taxes, drive up insurance premiums, break many campaign promises, and increase state budget deficits.  It  would jeopardize the quality of medical care, while imposing restrictions that failed when tried at the state level.  It ignores advice from doctors and federal experts, and lessons from countries with universal health care, about how to keep costs down.

Fact-checkers say Obama is lying about health care. Obama often contradicts himself. In the very same speech, Obama claimed that Medicare is “unsustainable” and “running out of money,” then contradicted himself by claiming that “Medicare is a government program that works really well,” making it a model for national health care.  The bill does nothing to curb massive waste and fraud in Medicare and Medicaid, even though it proposes to make massive cuts in Medicare (cuts so painful that most of them will never happen: year after year, Congress waives “the annual cut in fees paid by Medicare to physicians” mandated by an earlier law).

A CNN commentary noted that Obama’s plan would take away “5 freedoms,” contradicting Obama’s claim that the bill will leave you free to choose your doctor and keep your health care plan without government interference.

ObamaCare has also attracted criticism from groups like the Civil Rights Commission for containing both racial preferences and lower standards for treatment in predominantly-minority institutions, potentially harming both white applicants and minority patients.  This racial discrimination appears to violate court rulings like the Supreme Court’s Adarand decision, and the Rothe ruling by the Federal Circuit Court of Appeals.

Experts Question Enormous Cost and Constitutionality of Healthcare Legislation

by Hans Bader on January 13, 2010 · 1 comment

in Health and Illness, Healthcare, Insurance, Legal, Nanny State, Politics as Usual, Precaution & Risk, Regulation

The health care legislation backed by the president and congressional leaders will increase Americans’ health care costs by more than $200 billion, concludes an expert at the federal Centers for Medicaid and Medicare Services.

Earlier, Senator Orrin Hatch (R-Utah), a lawyer, argued that the “individual mandate” in the health care bill legislation, which forces people to buy health insurance, is unconstitutional.  Florida Attorney General Bill McCollum likewise is questioning whether it is constitutional to force people to do so.

This so-called “individual mandate” is unprecedented and appears to exceed Congress’s power under the Commerce Clause of the Constitution.  As the Congressional Budget Office noted in 1994, “A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States.”

As a news story notes, in Supreme Court rulings issued in 1995 and 2000, “the high court said the commerce clause is limited to economic activities that substantially affect interstate trade.”  (I was an attorney in the latter ruling, United States v. Morrison (2000).)  As UPI notes, “the weight of Supreme Court jurisprudence seems to favor a Commerce Clause challenge” to the health care legislation.

The individual mandate does not regulate activities, much less economic activities, but rather inactivity, by penalizing those who decline to buy health insurance. That exceeds Congress’s powers under the Supreme Court’s Morrison ruling, as I explained earlier.

The health care legislation also contains unconstitutional racial preferences for minority applicants, and lower standards of care for patients in predominantly-minority institutions.  These drew criticism from the Civil Rights Commission.

Most Americans oppose the health care legislation. It would reduce lifesaving medical innovation, raise taxes, drive up insurance premiums and the deficit, break many campaign promises, and impose heavy burdens on state budgets.  It  would also jeopardize the quality of medical care for many, while imposing restrictions that failed when tried at the state level, and ignoring advice from federal and academic experts, and lessons from countries with universal health care, about how to keep costs down.

Florida Attorney General Questions Constitutionality of Healthcare Bills in Congress

by Hans Bader on December 31, 2009

in Health and Illness, Healthcare, Insurance, Legal, Nanny State, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation

Florida Attorney General Bill McCollum is questioning whether it is constitutional to force people to buy health insurance, as the health care bills backed by the Obama administration require.  This “individual mandate” is unprecedented and appears to exceed Congress’s power under the Commerce Clause of the Constitution.

As the Congressional Budget Office noted in 1994“,

A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States. An individual mandate would have two features that, in combination, would make it unique. First, it would impose a duty on individuals as members of society. Second, it would require people to purchase a specific service that would be heavily regulated by the federal government.

As the news story about the attorney general’s concerns notes, in Supreme Court decisions issued in 1995 and 2000, “the high court said the commerce clause is limited to economic activities that substantially affect interstate trade in goods and services.”  (I was involved as an attorney in the latter of those two decisions, United States v. Morrison (2000)).

The individual mandate does not regulate activities, much less economic activities, but rather regulates based on inactivity, by penalizing those who decline to buy a product, health insurance (a product that young people generally do not need — as a young man, I did not go to the doctor or dentist, or purchase any drugs, for a 10-year period, and if I had become ill, my family could have easily paid my expenses).

That exceeds Congress’s powers under its Morrison and Lopez rulings, as I explained yesterday in a more extended analysis of the issue.  However, it is likely that at least four members of the current Supreme Court would vote to uphold the individual mandate, since the Morrison and Lopez decisions were 5-to-4 decisions.

Other aspects of the health care bills have also attracted legal criticism, such as their racial preferences and racial discrimination (it discriminates against white applicants in some provisions, and against minority patients in others; both forms of discrimination drew criticism from the Civil Rights Commission), and the manner in which they regulate insurance companies.

Regardless of whether the individual mandate is constitutional or not, it is certainly controversial — as are other aspects of the health care bills, which most Americans oppose.  As noted earlier, the bills would reduce life-saving medical innovation, raise many taxes, drive up insurance premiums and the deficit, break many campaign promises, and impose heavy burdens on state budgets.  They would also jeopardize the quality of medical care for many, while imposing restrictions that failed when tried at the state level, and ignoring advice from federal and academic experts, and lessons from countries with universal health care, about how to keep costs down.

Supreme Court Rules in Favor of White and Hispanic Firefighters in Ricci v. DeStefano

by Hans Bader on June 29, 2009 · 3 comments

in Economy, Employment, Features, Labor, Legal, Personal Liberty, Politics as Usual, Regulation, Zeitgeist

The Supreme Court has just ruled in favor of white and Hispanic firefighters, who were denied promotions when the City of New Haven threw out the exam they scored highest on, citing the fact that no black firefighter scored high enough. In Ricci v. DeStefano, the Court reversed a decision by the Second Circuit Court of Appeals, including Judge Sonia Sotomayor, whom Obama has nominated to the Supreme Court.

The appeals court, in an unpublished ruling designed to avoid scrutiny, had held that the City could throw out the test simply because the test excluded more blacks than whites, meaning it gave rise to a “prima facie” case of unintentional “disparate impact” discrimination (disparate-impact is when a test excludes substantially more members of one race or gender than another). The Supreme Court held that this was not reason enough to use race, at least where the test measures useful job skills.

“Frank Ricci, a firefighter in New Haven, Conn., worked hard, played by the rules, and earned a promotion to fire lieutenant. But the city denied him the promotion because he is not black. Ricci sued, along with 16 other whites and one Hispanic firefighter. After a 7-6, near-party-line vote by a federal Appeals Court to dismiss the lawsuit,” the Supreme Court decided to review the case. A three-judge panel including Judge Sotomayor had “dismissed” of Ricci’s case in an unpublished ruling, “in a process so peculiar as to fan suspicions that some or all of the judges were embarrassed by the ugliness of the actions that they were blessing and were trying to sweep the case quietly under the rug, perhaps to avoid Supreme Court review or public criticism, or both,” says the National Journal.

The lower courts have divided on how much public employers can use race-based affirmative action to offset tests or selection criteria with “disparate impact” without violating the Constitution. Some courts, like the moderate Seventh Circuit, have said that that public employers can’t use race at all to offset such tests or criteria, since the purpose of affirmative action is to remedy constitutional violations, and the Constitution (unlike some civil rights statutes) isn’t violated by disparate impact, but rather requires a showing of racism or intentional discrimination. Others, like the more liberal First Circuit, say that race can be used to offset tests’ “disparate impact” even if the test measures useful job skills and thus is “job-related,” as long as substantially more minorities fail it than whites — meaning that the “disparate impact” is only a “prima facie” or half-proven case, which doesn’t actually rise to the level of illegality (the civil-rights statute, Title VII, only bans tests with a “disparate impact” if they are not “job-related”).

In the Ricci case decided today, the Supreme Court took a middle path, saying that a mere racial imbalance (or “prima facie” case of disparate impact) is not enough to use race, but that disparate impact can be enough reason if there is “strong evidence” that the test not only excludes more blacks than whites, but also is not “job related” in the sense of requiring knowledge irrelevant to the job. Since the City of New Haven had no strong evidence that the test was not job-related, its decision to throw out the test was illegal.

However, it cautioned that this standard only limited statutory challenges to affirmative action, as opposed to Constitutional challenges, applying this standard to Title VII claims so that employers won’t face a discrimination claim no matter what they do (for intentional discrimination against whites if they throw out the test, or unintentional “disparate impact” discrimination if they keep the test that no blacks passed). It said that public employers might face additional requirements before they could use race under the Constitution (which, unlike Title VII, does not recognize “unintentional” discrimination or “disparate-impact” liability): “Our statutory holding does not address the constitutionality of the measures taken here in purported compliance with Title VII. We also do not hold that meeting the strong-basis-in-evidence standard would satisfy the Equal Protection Clause in a future case. As we explain below,because respondents have not met their burden under Title VII, we need not decide whether a legitimate fear of disparate impact is ever sufficient to justify discriminatory treatment under the Constitution.”

Thus, the Court’s decision does not abrogate the rulings of the federal appeals court in Chicago, the Seventh Circuit, which ruled in People Who Care v. Rockford Board of Education, 111 F.3d 528, 534 (7th Cir. 1997) Biondo v. Chicago, 382 F.3d 680, 681 (7th Cir. 2004), and Builders Association v. Chicago, that to defeat a constitutional lawsuit brought by victims of affirmative action or reverse discrimination, a public employer cannot rely on a test or selection criterion’s disparate impact. For example, Chief Judge Posner ruled in People Who Care v. Rockford Board of Education, 111 F.3d 528, 534 (7th Cir. 1997), that to use race to favor minorities, a school district must show that it once “discriminated intentionally” against them, since that is “the only kind of discrimination that violates the equal protection clause.”

Today’s decision does, however, effectively abrogate court rulings saying that a test’s mere “prima facie” disparate impact is enough to justify using race, given that the Supreme Court in United Steelworkers v. Weber, 443 U.S. 193, 206 fn. 6 (1979) said that the limits on affirmative action are tougher under the Constitution than under civil-rights statutes like Title VII, which was “not intended to incorporate” the tougher “commands of the Fifth and Fourteenth Amendments.” (The rulings allowing race to be used to offset tests’ racial imbalances are also hard to square with the Supreme Court’s recent ruling that race-based affirmative action is supposed to be a “last resort,” see Bartlett v. Strickland, 129 S.Ct. 1231, 1247 (2009)).

Justice Alito, in his concurring opinion, noted that there was an additional, independent ground for reversing the appeals court decision throwing out the white and Hispanic firefighters’ lawsuit: that the whole issue of tests’ alleged “disparate impact” was a red herring and a “pretext” because the appeals court ignored evidence that the City’s motivation was not a sincere desire to avoid “disparate impact” but rather just an excuse to engage in racial favoritism towards blacks.

Even if the City had legitimate motives for throwing out the test, if it also had illegitimate or mixed motives, that would render it liable under Title VII (and potentially the Constitution), under the Supreme Court’s “mixed-motives” precedents. (See Mount Healthy Bd. of Educ. v. Doyle (1977), and Price Waterhouse v. Hopkins (1989)). The city could only rely on the test’s “disparate impact” if that were its “actual purpose” for using race, and could not use any problems with the test as a justification if they “did not actually precipitate the use of race.” (See Shaw v. Hunt, 517 U.S. 899, 908 n.4, 910 (1996)).